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People who live in flood zones should be mandated to buy NFIP flood insurance or be inelligible for any bailouts afterwards. Homes that have had multiple payments for flooding well beyond the hope of ever being an actuarially viable location should not be rebuilt. The person being interviewed in this episode of Planet Money has had 3 large checks from the NFIP program. Records show that before he purchased the house there were 2 more large payouts. He bought the house knowing, or at least could/should have known, that it routinely goes underwater because he loves the neighborhood. Grew up there, blah blah blah. He actually pays for flood insurance ($4,800/year) but lots of people don't. His premiums would be sufficient if he lived in a 100 year flood zone. Clearly he doesn't. He lives in more like a 1 year flood zone.

And honestly, terrorist destruction of property isn't the same thing. Since 2002 everyone who buys property insurance has had a small chunk of their premiums going towards TRIA, the terrorism risk insurance act. If another 9/11 event happens and it gets declared an act of terror the money that we've all been paying will get used for rebuilding, not government handouts.

I don't think it's always smart to rebuild storm areas. I bought my cottage in 1998, and never had any flooding problems, even though it's in a flood zone. It was only after years of drought that it started happening. The soil wasn't absorbing the water after we finally got some rain. They have built a few new neighborhoods of large homes across the highway since that time. I have to put down straw in the front yard, in front of the house, and on the porch. It soaks up the water like a sponge. If I don't, the water comes in through the front door.

There's a lot more development happening in this area, and so I will probably need to build some sort of a wall. I feel for the people in those areas that had the hurricanes and flooding. There are so many variables.

People who live in flood zones should be mandated to buy NFIP flood insurance or be inelligible for any bailouts afterwards. Homes that have had multiple payments for flooding well beyond the hope of ever being an actuarially viable location should not be rebuilt. The person being interviewed in this episode of Planet Money has had 3 large checks from the NFIP program. Records show that before he purchased the house there were 2 more large payouts. He bought the house knowing, or at least could/should have known, that it routinely goes underwater because he loves the neighborhood. Grew up there, blah blah blah. He actually pays for flood insurance ($4,800/year) but lots of people don't. His premiums would be sufficient if he lived in a 100 year flood zone. Clearly he doesn't. He lives in more like a 1 year flood zone.

And honestly, terrorist destruction of property isn't the same thing. Since 2002 everyone who buys property insurance has had a small chunk of their premiums going towards TRIA, the terrorism risk insurance act. If another 9/11 event happens and it gets declared an act of terror the money that we've all been paying will get used for rebuilding, not government handouts.

Should the people in California who have been wiped out by the fires.....receive FEMA subsidy? And should they rebuild? After all, it’s being connected to climate change!

Should the people in California who have been wiped out by the fires.....receive FEMA subsidy? And should they rebuild? After all, itís being connected to climate change!

While FEMA will undoubtedly have some role in dealing with the aftermath of the fires most of the heavy lifting of the rebuilding cost will be born by the property insurance that the owners of the buildings carry. California is a Standard Fire Policy state so insurers can't exclude things like wildfires. And at least at this point property insurance is still readily available thanks to CA's FAIR plan that requires all property insurers in the state to contribute to a pool for high risk properties.

To answer your other question I would probably be ok with a mandate that any buildings in fire prone exurban areas be rebuilt with brick or other non-combustible exteriors and either terra cotta shingles, metal roof or other equally nonflammable materials. Whether that mandate should come from the insurance companies the same way they inspect to be sure that vegetation isn't right up against the house before writing a policy or whether it should be mandated by building code is debatable. As for the suburban subdivisions and suburban style shopping areas like the KMart and McDonalds that burnt down despite being surrounded by acres of asphalt parking lots I'd want to see a cost benefit analysis before insisting on more expensive building methods.

I realize that every region has their specific risks. That doesn't mean that we should abandon everywhere, but it does mean that we should be smart about how we rebuild, and we need to find ways to limit future losses when we decide to rebuild. Spending millions on repeated claims to repair a $500,000 house that has flooded multiple times in just a few years is simply not logical and shouldn't be a bill footed by the taxpayers.

Personally I think a better idea than the NFIP would be state laws requiring a "Standard Flood Policy" similar in concept to the Standard Fire Policy that is law in 36 states, (which mandates that property policies offer at least a certain minimum of coverage.) Couple that with something like CA's FAIR plan (except for flood instead of fire as in California) requiring every property insurer in the state to contribute proportionally to a pool that covers flood losses at locations that can only get insured through a flood pool, and mandates for elevated rebuilding and you'd have a sustainable system instead of repeated government bailouts. One of the benefits of CA's FAIR plan over something comparable to NFIP is that if wildfire claims get big enough everyone will see their property insurance bills rise and pressure will come to bear to get people to stop making irresponsible rebuilding decisions. The same would happen in flood prone areas.

I just read an article about a lawsuit filed against a public utility for failure to maintain lines and poles properly which contributed to many fires erupting and taking houses. I’m not sure insurance actuaries can feed all the variable into an algorithm and come up with a business model that profits but also reduces risk for consumers.

Actually, trees bumping power lines is apparently a fairly common cause of wildfires. It's one of the suspected causes of the current rash of fires we recently had. And a reasonable guess too since 70 mph wind gusts like we had that sunday night will surely push trees further than the normally go. If that turns out to be the case this time then PG&E's liability insurance will end up paying for a lot of the rebuilding. I have no idea how good the actuary's estimates are since they only work with past data, and if the climate is truly changing past performance may not be a good predictor of future performance. If they don't already, perhaps the actuaries need to review PG&E's annual tree trimming budget when they estimate the likelihood of wildfires...